The cure for high prices is high prices. The cure for low prices is low prices. That is the message from the hog cycle. When porkers are cheap fewer piglets are raised and a few years later the price of pigmeat rebounds. When pork is pricey too many piglets are raised and the market price falls.

The same thing historically applies to oil, and also gold. Back in the last years of the 1990s, oil fell to $10/barrel. The low price boosted demand and car-buyers reverted to their taste for gas-guzzlers and brought their clunkers out of the garage. The current crash will probably not result in these old cars leaving the dealer lots. Now they are near the end of their lives (except in Cuba and Panama where old US cars go to die.)

Lower oil prices will turn off some ventures: the deepest sub-salt, the least economic shale fields, and the most filthy Saskatchewan oilsands producers. Winners and losers cannot be determined without carefully examining their breakeven prices/bbl, so don't sell across the board.

But after a few years to adjust, the output from these uneconomic oilfields will not hit the market. And then a few years on the price of oil will rise again because of shortages. In the interval we have some ideas on how to play this.

Another anomaly is that Germany has now slipped into contraction, following the other major Euroland economies, France and Italy. That is actually good news from bad. Berlin's hardline anti-deficit hawks will have to react to Deutschland no longer being uber Alles: that heralds less flak for the likely European Central Bank launch of a Euro-own quantitative easing program, following on those of Japan and China.

Goldman Sachs says 2015 will be the year of Asia as the brokerage expects Asia-Pacific ex-Japan to return 11%. Japan will only pay out 8%, it figures. Meanwhile the US S&P is expected to fall more than the Europe Stoxx index mainly because the Fed is expected to hike rates.

The likely impact of all this money creation is bad for US companies, as profit growth will slow, one reason Wall Street was in a non-holiday mood. American stock prices have gotten ahead of themselves. But a policy switch heralds a better outlook in Euroland. That is our message for 2015 in a nutshell. I am not sure that the Japanese and Euroland central banks will produce a “Santa Claus rally” for European and Japanese equities, but I do expect better stock performance next year.

More from Portugal, Britain, Luxembourg, Colombia, Brazil, Panama, Hong Kong, France, The Netherlands, Australia, Israel, and Norway:

• At just under $1.50/sh, the latest bid for Portugal Telecom is a bummer. PT had cash flow (earnings before interest, taxes, depreciation, and amortization) last year of euros 1.1 bn. The lowball bid caused a 6.6% drop in European trading for PT which fell to euros 1.41 as nearly 17 mn shares were offloaded by panicky investors. US trading followed Lisbon.

While the Oi group gave exclusivity and a lockup to Altice, the Luxembourg holding company of Patrick Drahi, to buy its Portuguese assets for euros 7.4 bn, there are other players on the scene: the Angolan bid for euros 1.21 bn for a 25.7% stake via PT SGPS, the Portugal operating company; plus the venture capital bid for the whole company at euros 7.07 bn.

The venture capital bid from Apax Partners and Bain Capital, both of the US, was firmed late on Thanksgiving Friday by the addition of Sociedade de Investimento e Gestão (Semapa - SEMMY), a big Portuguese holding company in cement and paper. They are rumored  to be preparing a higher bid. The market doesn't believe it.

Altice says its bid is fully financed and includes euros 500 mn for future revenues by PT. Drahi, a Moroccan-born Franco-Israeli billionaire, raised the Altice bid from euros 7.025 bn Sunday morning. Oi wants to use the money to buy into more Brazilian mobile to gain scale.

PT has a veto on any deal over its stock. It also has assets which M. Drahi is not bidding on, notably the defaulted euros 897 mn it is owed by Rioforte Investments, also of Luxembourg, part of bankrupt Grupo Banco Espirito Santo of Portugal. Rioforte has assets in hotels, healthcare and hospitals, travel agencies, and agriculture.

Drahi already has a major stake in Portugal via Cabovisão which provides TV, Internet, and landline phone service and a small cellphone firm. So there will have to be approvals by competition regulators in Lisbon and Brussels.

For US shareholders, if the deals are too shareholder-unfriendly, expect class action suits a-coming. PT is listed here, in Lisbon, and in Brazil.

From the Oil Patch

• General Joe Shaefer, editor of Investor's Edge and fund manager of Stanford Wealth Management, thinks long-term investors should be buying oil stocks. He writes on Ecopetrol (EC):

“EC has no debt. None. We don't have to worry about them not being able to service their debt. At its current price, it's off 50% for the year, sells at a p/e of 7.6, a price-to-book (p/b) of 1.2, and Graham No. of 0.64. Like many foreign firms, it only pays annually, but its last dividend provided a yield of 11%. The only negative is way overblown. The FARC and an indigenous tribe object to EC's pipeline crossing 'their' territory. They express their indignation by blowing up the pipeline. EC just rebuilds it (with govt help). FARC antics [are] wearing thin. If the govt stops playing pat-a-cake with them and sends in the troops, EC will soar. “

Joe is wrong about EC debt. Its “core” sub Oleoducto Central (OCENSA) taps the markets in its place. Standard & Poor's upgraded OCENSA to BBB+ from BBB today precisely because EC is its guarantor and also maybe because a Colombian general whom the FARC managed to capture (because he was in the wrong place) was freed today. This actually allows the pat-a-cake talks in Cuba to resume. But like Joe I think Ecopetrol is the one to double up on.

The Graham number measure is the square root of 22.5x the eps (earnings/share) times the book value per share. It sets a maximum that a defensive investor should pay for the stock, 1.5x book value and 15x earnings. It was invented by Benjamin Graham, mentor to, among others, Warren Buffett, in his value investor's Bible, The Intelligent Investor, first published in 1949. Graham updated it in later editions published until 1971 with appendices by Buffett. IMHO the p/e ratio and p/b should be verified independently and not combined into a Graham number, why we don't use that metric.

• Joe also tips the most hated stock in the oilpatch as his “Big Oil of choice.” It is BP.

“It has lots of cash, roughly double [its] payout if every real and fraudulent claim was paid for the Deepwater Horizon accident. It sells at a p/e of 16, a p/b of 0.99, and Graham no. of 0.96, [at] the same price it sold for the month after it hit its low in May 2010.

Vivian adds: it yields 2.8% but it rose after Joe's article and the recovery of several oil majors like Exxon (XOM) and Chevron (CVX), putting its p/e at 17.5 according to my broker. We will watch this rather than jumping in.

• S&P also did a report on Latin American airlines, worrying about forex risks but expecting expansion of margins at 4 to 7% in 2015, and higher revenue growth at 5 to 15%, depending on country. It is most worried about Mexico.

The negative on FX is irrelevant for Copa Holdings (CPA), because Panama uses the US dollar as its currency and CPA is Panamanian. When it sells tix in other countries the airline could face pressure from competitors, but the tradition is to price Latin airline tickets in Greenbacks. We bought for the cheaper aviation fuel.

• Thanks to a declining zeal to drill, baby, drill, the cost of offshore production rigs has plummetted, good news for Delek Group which hires rigs to develop the vast Israeli offshore field appropriately named Leviathan according to Globes Israel, a financial website. DGRLY will also find it cheaper to build out the current operating gas wells at Tamar because a rig which had a day-rate of $650,000 a year ago now can be hired for $340,000/d. DGRLY has only minor exposure to the price of oil as its gas offtake prices in linked to other metrics.

• Brazil plans to boost the ethanol level in gasoline from 25% to 27.5% which should help our Cosan, which makes the stuff. CZZ is suffering because its pure ethanol alternative is under-selling blended fuel, because of the drop in crude prices. However state-owned Petrobras is favored by Brasilia (even apart from graft paid to the ruling party), and the actual basis of gas-station prices is impenetrable. This holds back capex by Cosan, according to today's Financial Times.

• Schlumberger (SLB) was slower to fall than the oil majors but now its stock has taken a hit despite a bit of recovery for the barrel price.

Neiges d'antan

• BB&T (a bank whose stock I own in my US account) downrated Chicago Bridge & Iron (CBI) to hold from buy. We sold it too soon, anticipating trouble in the oil engineering sector not sufficiently offset by its nuclear business.

• We sold way too soon but the oil price drop hurt Canadian National Railway, CNI, as expected.

• Non-oil Canada resource stocks should be in focus, starting with fertilizer maker Agrium, AGU.

Novartis & Rivals

• Shareholders of GlaxoSmithKline (GSK) were sent a notification of the new jv with Novartis (NVS) in OTC drugs which it will control, but have no proxy vote on the matter. Separately, GSK is said to be aiming to cut GBP 1 bn in costs for its US operations in part by cutting jobs related to Advair, its asthma drug, going ex-patent. Its replacement respiratory offerings, Breo and Anoro, have failed to capture enough market share as insurers and doctors crack down on high cost meds.

• Israeli Teva on Monday launched a generic of Novartis's Exforge, a high-blood pressure prescription med, a combo amlodipine, hydrochlorothiazide and valsartan. TEVA was first to file with the US FDA and was awarded with 180-days exclusivity.

• Some batches of a Novartis (NVS) flu jab are likely to be banned it Italy after 13 people died within 10 days of being injected with the “fluad” jab made by the Swiss giant, which is selling its flu-shot arm to CSL of Australia for $275 mn.

• Among Euro stocks remember Novo Nordisk, pitched by Rafi Benzaquen at Seeking Alpha over the weekend. NVO is a winner from aging as older people get type 2 (adult onset) diabetes; and from spreading wealth, longer life, and bad eating and drinking habits in emerging markets. NVO's market is growing 10%/yr as a result, Mr. Benzaquen argues, as it commands a 27% market leading position in diabetic care, and 47% of the modern insulin market. This he says makes it a GLP 1 stock.

GLP 1 is another term of art, standing for global leadership position in a niche. Ben Graham called this a “moat”

The Australian diabetes market (including drugs, delivery systems, monitors, and devices) skyrocketed over the last 25 years thanks to higher (70%) govt reimbursement and an older citizenry, I learned from the Diabetes Management Congress meeting Down Under. Type 2 diabetes comes on with age, obesity, couch potato lifestyle, stress, and bad diet. Dame Edna Everage and Barry McKenzie are from a high-growth diabetes market these days.

• Vodafone (VOD) is moving on the money-losing video streaming movie, music, and TV service run by UK supermarket giant Tesco, writes today's Financial Times. Bundling services is hot in the UK and TSCDY's “Blinkbox” is on the block and the price is not expected to be very high. This is a VOD riposte to the moves on cellphones being made by BT. Both aim at quadruple plays in cellular and land telephones, TV, and Internet.

Financial Services

• Norway is rolling out a mobile payment system using Gemalto as the identity security supplier. Franco-Dutch GTOMY, rather than a victim of new payments tech, is a likely winner.

• Our taste for China insurance (AIA) is shared by the founders of both Alibaba and Tencent. Both Messrs. Ma (Chinese for 'horse') yesterday revealed they had bought shares of China's second largest insurance co., Ping An, also listed on Hong Kong (as well as Shanghai.) Its Chairman is Dr. Peter Ma and it owns banks and insurance companies all over China. AIA (HK:1299) is a horse of a different color as it came out of the private sector, spun off by troubled AIG, and operates all over the Asia-Pacific including in Taiwan, Australia, Japan, India, Malaysia, Sri Lanka, New Zealand as well as China. It was founded in 1931 at the same time as AIG by their founder. AIA has a long capitalist history.

Separately, TCTZF fell in Hong Kong Trading by over 3%.

• New data reveal that the Pimco outflow was as much over Bill Gross running the fund manager as over his leaving it. Today the group issued the first managed fixed income ETF or UCIT for European investors which can be traded and processed in the Euroclear system. This will allow more global trading and lower costs. This fund, Pimco Low Duration US Corporate Bonds Managed, is listed in London, aimed at European investors, and invested in a non-index US corporate bond portfolio. This is good news for Pimco's parent, Allianz Insurance of Germany (ALIZF)

• The banking arm of troubled Tesco is also in focus after the rumored deal with Vodafone noted above.